Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don't make them change their opinion towards a company. This time it may be different. During the first 6 weeks of the fourth quarter we observed increased volatility and small-cap stocks underperformed the market. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Liberty Expedia Holdings, Inc. (NASDAQ:LEXEA) to find out whether it was one of their high conviction long-term ideas.
Liberty Expedia Holdings, Inc. (NASDAQ:LEXEA) was in 24 hedge funds' portfolios at the end of the third quarter of 2018. LEXEA investors should be aware of an increase in activity from the world's largest hedge funds lately. There were 16 hedge funds in our database with LEXEA holdings at the end of the previous quarter. Our calculations also showed that LEXEA isn't among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We're going to analyze the recent hedge fund action encompassing Liberty Expedia Holdings, Inc. (NASDAQ:LEXEA).
How are hedge funds trading Liberty Expedia Holdings, Inc. (NASDAQ:LEXEA)?
At Q3's end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from the second quarter of 2018. On the other hand, there were a total of 24 hedge funds with a bullish position in LEXEA at the beginning of this year. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, FPR Partners held the most valuable stake in Liberty Expedia Holdings, Inc. (NASDAQ:LEXEA), which was worth $86.2 million at the end of the third quarter. On the second spot was D E Shaw which amassed $50.8 million worth of shares. Moreover, Polar Capital, AQR Capital Management, and Hudson Bay Capital Management were also bullish on Liberty Expedia Holdings, Inc. (NASDAQ:LEXEA), allocating a large percentage of their portfolios to this stock.
As industrywide interest jumped, some big names were leading the bulls' herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the largest position in Liberty Expedia Holdings, Inc. (NASDAQ:LEXEA). Marshall Wace LLP had $10.2 million invested in the company at the end of the quarter. Steve Pigott's Fort Baker Capital Management also initiated a $7.3 million position during the quarter. The other funds with new positions in the stock are Lee Ainslie's Maverick Capital, Ian Cumming and Joseph Steinberg's Leucadia National, and Malcolm Fairbairn's Ascend Capital.
Let's go over hedge fund activity in other stocks similar to Liberty Expedia Holdings, Inc. (NASDAQ:LEXEA). These stocks are Quaker Chemical Corp (NYSE:KWR), Weatherford International plc (NYSE:WFT), TreeHouse Foods Inc. (NYSE:THS), and Triton International Limited (NYSE:TRTN). This group of stocks' market valuations resemble LEXEA's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KWR,11,163173,3 WFT,21,362168,-5 THS,18,257934,1 TRTN,12,60818,-3 Average,15.5,211023,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $211 million. That figure was $325 million in LEXEA's case. Weatherford International plc (NYSE:WFT) is the most popular stock in this table. On the other hand Quaker Chemical Corp (NYSE:KWR) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Liberty Expedia Holdings, Inc. (NASDAQ:LEXEA) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.